MUMBAI: Lower-than-normal government spending due to the poll code has slowed down economic growth to a lower-than-expected 6.7 per cent in the June quarter, said RBI governor Shaktikanta Das on Saturday. This is a 15-month low since the March 2023 quarter when the economy grew at 6.2 per cent. He expressed confidence in the economy meeting the central bank’s forecast for the full year.
On Friday, the first advance estimate by the National Statistical Office showed growth slipped to 6.7 per cent, as most of the sectors led by the critical farm sector slowed down. In the corresponding period of FY24, the gross domestic product had expanded by 8.2 per cent.
The Reserve Bank had projected a 7.1 per cent growth rate for the June quarter.
“Only two aspects have pulled the growth rate slightly down. Those are government (both central and state) expenditure and agriculture,” Das said in Bhubaneswar. He attributed the lower government expenditure to elections which were held from April through June and the resultant model code of conduct put in place by the Election Commission.
The other components which are the main drivers of growth such as consumption, investments, manufacturing, services and construction have registered a growth of over 7 percent, he said.
"We’d expect government spending to pick up in the coming quarters and provide the required support to growth," Das said. "Under these circumstances, we’re reasonably confident that the annual growth rate of 7.2 per cent projected by the RBI will materialise in coming quarters," he added.
Another disappointment was the agriculture sector which has recorded a minimal 2 per cent growth in the quarter. However, the monsoon has been very good so far and has spread all over the country except a few areas. So, everyone is optimistic about the agriculture sector too, he noted.
The National Statistical Office attributed the 15-month low in GDP growth mainly to the poor performance of the agriculture and services sectors.
Even as GDP growth slowed down, the GVA growth surprisingly accelerated between these quarters to 6.8 per cent from 6.3 per cent, which Aditi Nayar, the chief economist at Icra Ratings, attributed to the normalisation of growth in net indirect taxes, and thus this growth slowdown is not a cause for alarm.
According to the NSO data, agriculture growth decelerated to 2 per cent from 3.7 per cent in June 2023 and the expansion in financial, real estate and professional services too slowed to 7.1 per cent from 12.6 per cent.
Real GDP or GDP at constant prices is estimated at Rs 43.64 trillion against Rs 40.91 trillion on-year and the nominal GDP or GDP at current prices is estimated at Rs 77.31 trillion against Rs 70.50 trillion, showing a growth rate of 9.7 per cent.
The real GVA (gross value added) is estimated at Rs 40.73 trillion as against Rs 38.12 trillion, a growth rate of 6.8 per cent compared to 8.3 per cent and the nominal GVA is at Rs 70.25 trillion compared to Rs 63.96 trillion, a growth rate of 9.8 per cent over 8.2 per cent a year ago.
